BUYING A CAR OR TRUCK THROUGH REPOSSESSION AUCTIONS
By Paul Dewey
So you are looking for a car or truck, but you're tired of running around
town and finding other people selling their "headaches" through the local
classifieds, or dealers offering "cream-puffs" for inflated retail prices.
All you want is a good vehicle for a good price. Period. Does such a deal
exist? Yes, indeed! Repossession auctions are becoming more and more
popular across the country. I have been attending them for over 20 years,
and have purchased many cars and trucks at bargain prices - everything from
a brand new car (still with the window sticker on it and 3 miles on the
odometer) for $1,100 below the sticker price, to a conversion van with
99,000 miles on it. Both of these vehicles are still in the family and
running strong.
What I'd like to do here is share my experiences with you, and give you some
tips on how you, too, can find these bargains.
First of all, how do you find the auctions? Your local paper is a good place
to start. Many banks and other financial institutions (such as GMAC) list
the times and places of their auctions in Sunday papers under "Auctions" or
"Cars for Sale". Also, if there is a "legal publication" in your area, that
publishes court proceedings, bankruptcy notices, etc., this is another
source for repossession auto auction notifications. One other way to find
them is to call your local banks and ask for the Installment Loan
Department. They should be able to provide you with details on their
particular auctions. Many even have regular mailing lists, where they will
automatically send you a notification of their auction and even a listing of
what vehicles will be included. While some institutions restrict their
auctions to dealers only, most will allow the public to attend and bid.
Once you have found an auction, be sure to get all the details BEFORE you go.
You'll need to know if there are any minimum bid requirements, what type of
payment they need, and what type of paperwork they provide to the
purchasers. Many auctions will sell everything to the highest bidder, no
matter how low the bid is. Still others may have a minimum bid they must
get, or they "buy back" the car and save it for the next auction. Most
institutions retain the right to bid, so be aware that you may be not only
be bidding against other people interested in the vehicle, but also against
the auctioneer!
While most auctions will publish their requirements for payment along with
the auction notification, DON'T assume that that's all there is to it. Find
out if they expect cash only, certified checks or personal checks. Also,
many require full payment immediately after the sale, while others may
require a non-refundable deposit with the balance due in a few days. All
too often I have seen people make costly errors at auctions because they
didn't understand these payment rules.
In this day and age of red tape, titles, liens, etc., the paperwork an
institution provides is as important as anything else. In New York State,
for example, if the institution sells the vehicle with "as-is" marked on the
bill of sale, you may encounter a legal nightmare that involves a major
full-vehicle inspection and an 8 to 10 week wait for a title search and
registration procedure that will prevent you from putting the vehicle on the
road for months. It is imperative, therefore, that you find out
specifically what paperwork the institution will give you when you purchase
a vehicle through their auction. If you plan on registering the car right
away, tell them that and make sure you are satisfied that they will give you
what you need. If in doubt, contact your local Motor Vehicle office ahead
of time to insure that you'll be able to proceed with what the institution
will be giving you. Laws vary dramatically from state to state.
Above all, make sure that all liens have been satisfied before you purchase a
repossessed vehicle. Most banks and financial institutions will give you
some type of form to verify this.
OK... now you've found the auction and understand the rules and requirements.
The next step is finding the vehicle that fits your needs. In order to
know what the vehicle's value is before you bid on it, you'll need a good
resource of wholesale and retail pricing. One good source is the NADA "Blue
Book". This book lists cars and light trucks by manufacturer and body
style, giving you the current average wholesale and retail for each. I have
used a book called "Edmund's Used Car Prices" for the past 15 years or so,
and found them to be a very reliable source. Like the NADA book, it lists
the cars and light trucks by manufacturer and year (usually the past 7 model
years), and provides the vehicle's original list price, current average
wholesale and retail. It also provides you with a list of popular options,
and what they add to the value of the car or truck. There's plenty of
details in the book which I won't go into here. Just make sure you read the
"How to Use This Book" section thoroughly before you start using it.
Options such as air conditioning, power steering and brakes and type of
transmission may dramatically affect the value of the vehicle. Also,
excessive mileage for that particular year car or truck will affect the
value. So, read the book and know how to use it BEFORE you get to the
auction.
The next step will be to get an up-close look at the vehicles. You may find
a car listed in the paper that is just what you want, only to get there and
find out it's missing a couple of wheels, or the front bumper has been
pushed back a few feet! Unless you know a good mechanic, or have your own
shop and tools, walk away from these damaged cars! Find out when the first
available times are for inspection before the sale, then get there early to
give you time to look things over.
You'll find the best way to buy at an auction is to not be too specific as
far as what you want. If you think you want a Chevy Celebrity, for example,
take the time to look at the Pontiac 6000s, Olds Cieras and Buick Centurys.
If you want a 2 door, don't overlook the same type of car in a 4 door
model. The more limited your preferences, the less chance you have of
getting a "real bargain". Actually, the best way to "shop" an auction is to
first eliminate all the vehicles that you're NOT interested in. Then you
can spend your time looking over the others.
Once you have determined which ones interest you, take a close look at each
to make sure you have the correct information as to make, model, year,
options, etc., and calculate the book wholesale and retail. If the
institution provides you with a printed list of the vehicles, make notes
about it and write down the prices - don't rely on your memory. When the
bidding starts, you want to have all the information written down in front
of you so you know exactly where you stand.
As you look over the car or truck, check first to see if it comes with a
proper set of keys. You may assume it does, but most auctions will tell you
that "what you see is what you get". I have bought 2 cars without keys -
both started right up after I had a set made - but you may not be so lucky.
If in doubt whether it will run or not, you're best to cross it off your
list and go on to the next. If you are a real gambler, and you're STILL
interested in it, look at the wholesale of the vehicle, then subtract the
amount of a new motor and transmission (assuming the worst - that they'll
both have to be replaced) and estimate you cost in time and money of finding
someone to make you a new set of keys.
If the keys are in the vehicle, get in it and start it up. Listen carefully
for clues of possible problems - a grinding starter or a weak battery could
indicate that you'll need to invest some additional money into the vehicle
after you buy it. If it fires up. listen for knocking or pinging
immediately after if starts. Again, any tell-tale noises will mean you'd
better plan on spending money for repairs if you buy the vehicle. Watch the
mirrors for blue smoke coming from the exhaust - a sure sign of an
oil-burner. That could mean some major engine repairs are needed.
With the vehicle in neutral, rev the motor, and again listen for strange
noises and watch for smoke. Check the transmission to be sure it works, and
the clutch if it's a standard shift. BE CAREFUL when putting it in gear,
however! You may find that when you ease it into Drive that the car leaps
forward... that's a bad time to realize that the brakes don't work!
Whenever you are looking or running an auction vehicle, assume the worst.
Test everything you can while sitting there, and above all, use common sense
and caution when trying out the transmission... after all, there may be
people standing in front or in back of the vehicle, and you DON'T want to
get anyone hurt!
Once you find the engine and transmission work to your satisfaction, test the
radio, air conditioning, heater, wipers, power windows, power seats, lights,
turn signals - try everything, and make notes of those things that don't
work or may need repair.
Get out of the car, and sight along the body. Are there dents that need
repairing? Has the car or truck been re-painted and/or fiber-glassed in
spots? Do all the windows, doors, hood and trunk open, close and fit
properly?
Look under the hood. Does the battery look good? Check the oil. If it's low,
it may mean it burns oil or it has a leak. Smell the dipstick. Does the
oil smell "burned" or does it smell like gas or antifreeze? If so, major
engine repairs may be needed. Look at the oil. Is it dark and dirty? Are
there indications of pieces of metal or sludge build up on the dipstick?
More possible engine repairs. How does the engine compartment look? If
it's covered with sludge or oil, it may mean a bad oil leak somewhere -
again, major engine repairs may be needed. Check the antifreeze and
transmission fluid to see if they are full and clean. Tug on the belts and
hoses to make sure they fit properly and are not loose. Look for loose
wires.
While you've got the hood up, look for a maintenance sticker somewhere
(sometimes on the inside of the driver's door, also). If you find one,
check the date and mileage against the current mileage. Does the difference
seem right?
Now get underneath the vehicle. Look at tread wear on the tires. Uneven
wear may mean alignment or suspension repairs needed. Are all 4 tires in
good shape? If not, figure on replacing the bad ones. Do the springs and
shocks look OK? Check out the exhaust system for holes, rust or missing
pieces. Look at the bottom of the engine, transmission and axle housing. A
thick layer of oil and/or sludge build up may mean repairs are in order.
If the auction really sells the vehicles "as is", don't be surprised to find
some odd items of interest in the car or truck. If you find the back seat
full of trash and/or the ashtrays overflowing, chances are the previous
owner was not what you'd call "meticulous". I have found that the more
trash and junk there is in a car, the better the odds are that they really
didn't care about it and let important things such as oil and filter changes
slip by!
Finally, look in the trunk. Is the spare tire good? If it shows signs of
uneven wear, it may indicate the vehicle has suspension problems. Is the
jack there, and does it look like it works? Figure in the price of buying a
new one if not.
Now that you've looked the vehicle over thoroughly, take a few minutes to
check you notes. Starting with the adjusted book wholesale price (after
adding/subtracting options, etc.), subtract the value of any repairs or
missing parts you'll have to put into the vehicle. Don't be shy on your
cost estimates. If you see it needs a new battery, and think a new battery
will cost you $50-$80, assume the highest and take $80 off the wholesale.
Better yet, take off $100 because it's going to take you time and effort to
go and purchase that battery. Use the same logic for all other repair and
parts estimates. When in doubt, estimate any repairs and/or parts HIGH!
After subtracting all your estimated repairs and parts costs, you've got a
good estimate of what this vehicle is worth to you. Cross off the wholesale
price on you list, and write this new amount down. This is the MAXIMUM
PRICE you should expect to pay for this vehicle. At this point, if you are
STILL interested in the vehicle, and willing to do all the work that's
needed on it, leave it on your list. If not, or if you have any doubts at
all, CROSS IT OFF YOUR LIST and forget about it! Go on to the next one.
Now you've got your updated list, along with revised wholesale estimates, and
it's time to start the auction. If the auctioneer is planning on selling
the vehicles in a certain order, be sure you know where and when "your"
vehicles will come up. That way, you'll know if the one you really prefer
will be sold before or after another one that you're considering. This
helps get your mind set to the order in which your list will go.
Try not to show TOO much attention to one particular vehicle, and keep your
thoughts to yourself! "Hugging" a car or stating "THIS is the one!" will
indicate to others that they'll have to out-bid you. Don't give them
anything that will help them decide on raising THEIR "maximum price".
If you're fortunate enough to have the very first vehicle to be auctioned on
your list, be ready! Virtually without exception, I have found the first
vehicle to be auctioned off goes low, as people are hesitant to jump in on
the very first one.
When it comes time to bid, don't let the auctioneer or anyone else intimidate
you. Set a plan of action, then stick to it. Your plan should include
starting out as low as possible, and working your way in the SMALLEST
increments possible towards your MAXIMUM PRICE. If the auctioneer says
"Let's start the bidding at $1,000", DON'T jump in with a "YES". Start at
$100. Too many times I've seen that happen where someone was anxious to buy
a car worth $3,000, and when the auctioneer opened the bidding at $2,000
they said "Yes" - and got the car on one bid because no one else was
interested in it. Had they started lower, they could have saved some money.
As the bidding progresses, there are two basic styles of bidding to use. The
first is the "psych-them-out" approach. An experienced bidder will let
others start the bidding out, and then as the bidding slows down and it gets
down to two people, he'll jump in at the last minute and hope that the
element of surprise catches them both off guard. I have used this approach
successfully, but it does take some experience to know when to hold back and
when to jump in.
The second style of bidding is "I-want-it-no-matter-what" approach. This
type of bidder will jump right in at the start and run the bidding up so
quickly that others will realize they have no chance of getting the vehicle
and drop out. Most first time bidders use this approach. The only problem
with this style is that you may find yourself over-bidding on the vehicle
because you get caught up in the bidding and forget your "maximum price".
There are many variations on these two basic styles of bidding, too. You can
take the second approach, starting early in the bidding and working your way
up quickly, and then drop out at a predetermined amount. Then, when
everyone thinks you're out of it, you pick up on the first approach and jump
back in at the end. There's also the style of waiting until the auctioneer
tries to close the bidding with something like "Going once... going
twice..." - where you can jump in with $25 more just before the sale closes.
This takes some experience. The one thing this style usually does is upset
the other bidder and sometimes even the auctioneer, but you're not there to
please anyone but yourself!
Again, don't be intimidated by anything or anyone. Stay as calm as possible
and keep a rational point of view throughout your bidding.
As I said earlier, I have been attending auctions for over 2 decades.
Between myself, my father and my brothers, we have purchased over 22 cars
and trucks. Are there "bargains" out there? You betcha! All you have to do
is find them! At a recent local bank auction, here are some examples of
what I saw:
"Book Value" Sold
Vehicle: Mileage: Wholesale/Retail For:
87 Plymouth Horizon 30,264 $4400/$5100 $4150
85 Izuzu Trooper 4WD 46,499 $5500/$6300 $3800
84 Pontiac Sunbird 55,737 $3100/$3500 $1850
83 Olds Ciera - "loaded" 77,377 $3350/$3925 $1900
87 Nissan King Cab Pickup 11,389 $5825/$6625 $4650
87 Ford Escort GT 23,258 $5600/$6300 $5100
86 Jeep Comanche Pickup 69,358 $4775/$5225 $4075
86 Mazda 626 LX - minor damage 29,271 $6400/$7600 $4000
Of course, there WERE some that went for over book value, but in most cases
they were individuals who were "bent" on getting the vehicle no matter what.
There was even an Audi 5000 CS 4 door sedan - with every available option
except turbo and sunroof - that sold for $11,850, while most everyone stood
around and shook their heads in amazement!
All in all, with a little common sense and a knowledge of what to look for,
you can find that "bargain" at your local repossessed auction.